Don't Mess With Taxes

Ill-gotten gains used to fund a lavish lifestyle.

For 10 years, a Rhode Island man ran a Ponzi scheme that ultimately left conned investors empty handed, while he used the funds to pay for his own lavish lifestyle.

At the same time, Thomas Huling, 58, of West Warwick, also was ripping off the U.S. Treasury.

On March 19, Huling was sentenced to eight years in federal prison for those crimes. The jail term comes 18 months after he pleaded guilty, back in September 2022, to wire fraud and tax evasion. Under the plea deal, the government agreed to the dismissal of all other counts in the original 21-count indictment.

In addition to his prison sentence, U.S. District Judge Mary McElroy for the District of Rhode Island ordered Huling to serve three years of supervised release, and to pay restitution to the United States and victims of the fraud in an amount to be determined later.

Decade of Ponzi schemes: The investment schemes, which according to court documents were promoted between 2008 and 2018, ranged from high-yielding bond trading platforms to car emissions reduction technology to online advertising and marketing company.

Huling solicited funds for these investments by representing, among other things, that the investments would achieve quick and substantial returns with little or no risk.

All told, he collected approximately $14 million, using money raised from new investors to pay off earlier victims who raised questions. His victims lost more than $6 million.

Funds diverted to lavish personal lifestyle: Meanwhile, federal prosecutors John Kane, acting section chief of the Justice Department's Tax Division and Sandra Hebert, assistant U.S. Attorney for the District of Rhode Island, noted that Huling diverted investor money to fund a lavish lifestyle.

The Ponzi money paid for high-end vehicles, membership and golf fees at multiple country clubs, gambling, clothing, restaurants, vacations and travel, and improvements to his home.

He created and used multiple shell companies, opened more than 50 bank accounts, and engaged in convoluted financial transactions between accounts to conceal his personal use of the funds.

Tax evasion, too: While Huling was defrauding his investors, he was also evading his taxes, according to court filings. Investigators estimated that his tax evasion cost the U.S. Treasury between $1.5 million to $3.5 million.

Internal Revenue Service Criminal Investigation (IRS CI) and Federal Bureau of Investigation (FBI) special agents found that between 2009 and April 2018, Huling reported no taxable income, paid no income taxes, and for certain years filed fraudulent individual and corporate income tax returns.

To hide his income, investigators said Huling used nominee bank accounts and paid for personal expenses using cash and corporate debit cards. He also falsified the books and records of his companies by recording sham loans, titled personal assets in the name of shell companies, and made false statements to IRS special agents.

Tax Felon Friday: IRS CI was part of the Huling investigation. Its agents — who are posted in 20 field offices across the United States, and 12 attaché posts abroad — is the only federal law enforcement unit with jurisdiction over violations of the Internal Revenue Code.

Their work pays off in most cases. IRS CI has a nearly 90 percent federal conviction rate.

If you want to catch up on other tax miscreants that have been taken down by IRS CI and other federal investigators, the ol' blogs' special Tax Felon Friday page is a good place to start.

And if you want more tax crime posts, notably those that were published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.

You also might find these items of interest:

• Bernie Madoff's tax legacy: Ponzi scheme loss deduction
• Texas man charged in apparent first-ever criminal crypto capital gains tax case
• Crypto fraud, international scheming, greedy families: All are in IRS CI's top 10 tax crime cases of 2023

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